H. B. 4063
(By Mr. Speaker, Mr. Chambers, and Delegate Ashley)
[By Request of the Executive]
[Introduced January 15, 1996; referred to the
Committee on Finance.]
A BILL to repeal section eight, article twenty-one, chapter
eleven of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, and to enact in lieu thereof
a new section eight; to amend and reenact sections fifty-one
and seventy-one of said article twenty-one; and to amend and
reenact section six, article twenty-three of said chapter
eleven, all relating generally to imposing personal income
and business franchise taxes; providing a low income
exclusion from federal adjusted gross income; increasing
threshold for filing certain income tax returns; making
technical corrections; reducing the rate of business
franchise tax; and specifying effective dates.
Be it enacted by the Legislature of West Virginia:
That section eight, article twenty-one, chapter eleven of
the code of West Virginia, one thousand nine hundred thirty-one, as amended, be repealed and that a new section eight be enacted
in lieu thereof; that sections fifty-one and seventy-one of said
article twenty-one be amended and reenacted; and that section
six, article twenty-three of said chapter eleven be amended and
reenacted, all to read as follows:
ARTICLE 21. PERSONAL INCOME TAX.
§11-21-8. Low income exclusion.
(a) Earned income exclusion. -- In the case of an eligible
taxpayer, there shall be allowed as a deduction from federal
adjusted gross income the amount of his or her earned income
included therein, not to exceed ten thousand dollars, except that
when a husband and wife file separate returns under this article
this exclusion shall not exceed five thousand dollars per
separate return: Provided, That for the taxable year beginning
the first day of January, one thousand nine hundred ninety-six,
the exclusion provided for in this section shall apply only to
earned income received after the thirtieth day of June, one
thousand nine hundred ninety-six, and the amount excluded shall
not exceed fifty percent of the annual low income exclusion
amounts set forth in this subsection (a).
(b) "Eligible taxpayer" defined. -- The term "eligible
(1) Any unmarried individual and any husband and wife filing
a joint return under this article who has or have federal adjusted gross income of ten thousand dollars or less for the
taxable year, or
(2) Any husband or wife filing a separate return under this
article who has federal adjusted gross income of five thousand
dollars or less.
(c) "Earned income" defined.
(1) The term "earned income" means:
(A) Wages, salaries, tips, and other employee compensation,
(B) The amount of the taxpayer's net earnings from self-
employment for the taxable year (within the meaning of section
1402(a) of the Internal Revenue Code), but such net earnings
shall be determined with regard to the deduction allowed to the
taxpayer under section 164 of the Internal Revenue Code.
(2) For purposes of this section:
(A) The earned income of an individual shall be computed
without regard to any community property laws,
(B) No amount received as pension or annuity shall be taken
into account, and
(C) No amount received for services provided by an
individual while the individual is an inmate at a penal
institution shall be taken into account.
(d) Taxable year must be full taxable year. Except in the
case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowed under this section in the
case of a taxable year covering a period of less than twelve
§11-21-51. Returns and liabilities.
(a) General. -- On or before the fifteenth day of the fourth
month following the close of a taxable year, an income tax return
under this article shall be made and filed by or for:
(1) Every resident individual required to file a federal
income tax return for the taxable year, or having West Virginia
adjusted gross income for the taxable year, determined under
section twelve in excess of the sum of his or her West Virginia
personal exemptions: Provided, That the tax commissioner may by
legislative rule specify circumstances when an individual is not
required to file a return;
(2) Every resident estate or trust required to file a
federal income tax return for the taxable year, or having any
West Virginia taxable income for the taxable year, determined
under section eighteen;
(3) Every nonresident individual having any West Virginia
adjusted gross income for the taxable year, determined under
section thirty-two, in excess of the sum of his or her West
Virginia personal exemptions, except when all of such nonresident
individual's West Virginia source income is taxed on a composite
return filed under this article for the taxable year; and
(4) Every nonresident estate or trust having items of income
or gain derived from West Virginia sources, determined in
accordance with the applicable rules of section thirty-two as in
the case of a nonresident individual, in excess of its West
(b) Husband and wife.
(1) If the federal income tax liability of husband or wife
is determined on a separate federal income tax return, their West
Virginia income tax liabilities and returns shall be separate.
(2) If the federal income tax liabilities of husband and
wife other than a husband and wife described in subdivision (3)
of this subsection (b) are determined on a joint federal return,
or if neither files a federal return:
(A) They shall file a joint West Virginia income tax return,
and their tax liabilities shall be joint and several, or
(B) They may elect to file separate West Virginia income tax
returns on a single or separate form, as may be required by the
tax commissioner, if they comply with the requirements of the tax
commissioner in setting forth information, and in such event
their tax liabilities shall be separate.
(3) If either husband and wife is a resident and the other
is a nonresident, they shall file separate West Virginia income
tax returns on such single or separate forms as may be required
by the tax commissioner, and in such event their tax liabilities shall be separate.
(c) Decedents. -- The return of any deceased individual
shall be made and filed by his or her executor, administrator, or
other person charged with his or her property.
(d) Individuals under a disability. -- The return for an
individual who is unable to make a return by reason of minority
or other disability shall be made and filed by his or her
guardian, committee, fiduciary or other person charged with the
care of his or her person or property (other than a receiver in
possession of only a part of his or her property), by his or her
duly authorized agent.
(e) Estates and trusts. -- The return for an estate or trust
shall be made and filed by the fiduciary.
(f) Joint fiduciaries. -- If two or more fiduciaries are
acting jointly, the return may be made by any one of them.
(g) Tax a debt. -- Any tax under this article, and any
increase, interest or penalty thereon, shall, from the time it is
due and payable, be a personal debt of the person liable to pay
the same, to the state of West Virginia.
(h) Cross reference. -- For provisions as to information
returns by partnerships, employers and other persons, see section
fifty-eight. For provisions as to composite returns of
nonresidents, see section fifty-one-a. For provisions as to
information returns by electing small business corporations, see section thirteen-b, article twenty-four of this chapter.
(i) Effective date. -- This section, as amended by this act
in the year one thousand nine hundred ninety-six, shall apply to
all taxable years beginning after the thirty-first day of
December, one thousand nine hundred
§11-21-71. Requirement of withholding tax from wages.
(a) General. -- Every employer maintaining an office or
transacting business within this state and making payment of any
wage taxable under this article to a resident or nonresident
individual shall deduct and withhold from such wages for each
payroll period a tax computed in such manner as to result, so far
as practicable, in withholding from the employee's wages during
each calendar year an amount substantially equivalent to the tax
reasonably estimated to be due under this article resulting from
the inclusion in the employee's West Virginia adjusted gross
income of wages received during such calendar year. The method
of determining the amount to be withheld shall be prescribed by
the tax commissioner, with due regard to the West Virginia
withholding exemption of the employee and any low income
exclusion allowed to such employee under section eight of this
article and asserted in good faith by the employee. This section
shall not apply to payments by the United States for service in
the armed forces of the United States: Provided, That the tax
commissioner may execute an agreement with the secretary of the treasury, as provided in 5 United State Code, § 5517, for the
mandatory withholding of tax under this section on pay to members
of the national guard while participating in exercises or
performing duty under 32 United States Code, § 502, and on pay to
members of the ready reserve while participating in scheduled
drills or training periods or serving on active duty for training
under 10 United States Code, § 270(a).
(b) Withholding exemptions. -- For purposes of this section:
(1) An employee shall be entitled to the same number of West
Virginia withholding exemptions as the number of withholding
exemptions to which he or she is entitled for federal income tax
withholding purposes. An employer may rely upon the number of
federal withholding exemptions claimed by the employee, except
where the employee claims a higher number of West Virginia
(2) With respect to any taxable year beginning after the
thirty-first day of December, one thousand nine hundred eighty-
six, the amount of each West Virginia exemption shall be two
thousand dollars whether the individual is a resident or
(c) Exception for certain nonresidents. -- If the income tax
law of another state of the United States or of the District of
Columbia results in it residents being allowed a credit under
section forty sufficient to offset all taxes required by this article to be withheld from wages of an employee, the tax
commissioner may by regulation relieve the employers of such
employees from withholding requirements of this article with
respect to such employees.
(d) Effective date. -- The provisions of this section, as
amended in the year one thousand nine hundred
ninety-six, shall apply to all taxable years or portions thereof
beginning after the thirty-first thirtieth day of December June,
one thousand nine hundred eighty-six ninety-six.
ARTICLE 23. BUSINESS FRANCHISE TAX.
§11-23-6. Imposition of tax; change in rate of tax.
(a) General. -- An annual business franchise tax is hereby
imposed on the privilege of doing business in this state and in
respect of the benefits and protection conferred. Such tax shall
be collected from every domestic corporation, every corporation
having its commercial domicile in this state, every foreign or
domestic corporation owning or leasing real or tangible personal
property located in this state or doing business in this state
and from every partnership owning or leasing real or tangible
personal property located in this state or doing business in this
state, effective on and after the first day of July, one thousand
nine hundred eighty-seven.
(b) Amount of tax and rate; effective date. --
(1) On and after the first day of July, one thousand nine hundred eighty-seven, the amount of tax shall be the greater of
fifty dollars or fifty-five one hundredths of one percent of the
value of the tax base, as determined under this article:
Provided, That when the taxpayer's first taxable year under this
article is a short taxable year, the taxpayer's liability shall
be prorated based upon the ratio which the number of months in
which such short taxable year bears to twelve: Provided,
however, That this subdivision (1) shall not apply to taxable
years beginning on or after the first day of January, one
thousand nine hundred eighty-nine.
(2) Taxable years after December 31, 1988. -- For taxable
years beginning on or after the first day of January, one
thousand nine hundred eighty-nine, the amount of tax due under
this article shall be the greater of fifty dollars or seventy-
five one hundredths of one percent of the value of the tax base
as determined under this article: Provided, That when
(2) Taxable years after June 30, 1997. -- For taxable years
beginning on or after the first day of July, one thousand nine
hundred ninety-seven, the amount of tax due under this article
shall be the greater of fifty dollars or seventy hundredths of
one percent of the value of the tax base as determined under this
(c) Short taxable years. -- When the taxpayer's taxable year
for federal income tax purposes is a short taxable year, the tax determined by application of the tax rate to the taxpayer's tax
base shall be prorated based upon the ratio which the number of
months in such short taxable year bears to twelve: Provided,
however, That when the taxpayer's first taxable year under this
article is less than twelve months, the taxpayer's liability
shall be prorated based upon the ratio which the number of months
taxpayer was doing business in this state bears to twelve but in
no event shall the tax due be less than fifty dollars.
NOTE: The purpose of this bill is to provide tax relief by
providing a low income exclusion for West Virginia personal
income tax purposes effective July 1, 1996, and reducing the
business franchise tax rate for taxable years beginning after
June 30, 1997.
Strike-throughs indicate language in current law that would
be deleted. Underscoring indicates new language that would be
§11-21-8 (low income credit) is new. Therefore, strike-
throughs and underscoring are omitted.